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abstract
In this paper we examine the to-date relevance of Duesenberry´s
Consumption Theory through an applied case to four economies
in Latin America: Mexico, Brazil, Argentina and Colombia. Using
annual time series of these countries we show that some empirical
evidence of Duesenberry´s theory still holds and should not be
discarded in modern macroeconomics as it has happened in regular
macro text books in mainstream economics. Duesenberry´s theory
includes important institutional factors that cannot be replaced by
the permanent income hypothesis or the life cycle hypotheses. In the
paper we explore different specifications of the consumption functions
based on the relevant literature. Final conclusions are presented.
k e y wo r d s : Consumption Theory, Duesenberry, Latin America.
j e l c o d e s : E12, E21, 054.
resumen
En este trabajo se examina la relevancia de la teoría del consumo de
Duesenberry a través de un estudio de caso aplicado a cuatro eco-
nomías de América Latina: México, Brasil, Argentina y Colombia. A
través de series de tiempo y de algunas pruebas empíricas demos-
tramos que la teoría de Duesenberry todavía tiene validez y no debe
ser descartada de la macroeconomía moderna. Dicha teoría incluye
importantes factores institucionales que no puede ser sustituida por
la hipótesis del ingreso permanente o de la hipótesis del ciclo de vida.
En este artículo se explora diferentes especificaciones de las funciones
de consumo basadas en la literatura relevante.
p a l ab r a s c l ave : Teoría del Consumo, Duesenberry, Lati-
noamérica.
c l a s i f i c a c i ó n j e l : E12, E21, 054.
Introduction
86,6
86,4
86,2
86,0
85,8
85,6
85,4
85,2
2002 2003 2004 2005 2006
Canada (C/Yd)
77,8
77,6
77,4
77,2
77,0
76,8
76,6
76,4
76,2
2002 2003 2004 2005 2006
80,0
79,0
78,0
77,0
76,0
75,0
74,0
73,0
72,0
71,0
2002 2003 2004 2005 2006 2007
Germany
77,8
77,6
77,4
77,2
77,0
76,8
76,6
76,4
76,2
2002 2003 2004 2005 2006
France
77,8
77,6
77,4
77,2
77,0
76,8
76,6
76,4
76,2
2002 2003 2004 2005 2006
Japan
74,5
74,0
73,5
73,0
72,5
72,0
71,5
71,0
70,5
70,0
2002 2003 2004 2005 2006
Later during the 40s and 50s new empirical evidence found
that the average propensity to consume was not a declining
function but a constant in the long run. The debate generated
different attempts to solve this puzzle as the stylized facts in
short run cross sectional studies of household income showed
the opposite: the average propensity to consume fell as income
rises.There was therefore a clear contradiction between the short
run cross sectional consumption functions and the long run one.
100,0
90,0
80,0
70,0
60,0
50,0
40,0
30,0
20,0
10,0
0,0
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
A rgentina B ras il C olombia Mex ic o
for Yo but in our case with not very good data bases (annual data instead of
quarterly data) we preferred to use the original Duesenberry´s formula.
And obviously,
Tabla 1
Duesenberry´s Consumption Functions for
four countries in Latina America:
Brazil, Mexico, Argentina and Colombia (1980-2005)
Model: (C/Y)t = α ' + β ' (Y/Yo)t + γ ' (C/Y)t-1
h-Durbin
Countries α' β' γ' R2 (5%)
Brazil 0.42844* -0.05403 0.5969* 0.3970 -0.55
Mexico 0.17664 0.03920 0.751087* 0.5362 2.34
Argentina 0.30399* -0.01273 0.6769* 0.7783 1.42
Colombia 0.20350* -0.07050* -0.8737* 0.9239 0.33
All countries 0.184447* -0.018231 0.799364* 0.7999 0.81
* Significant at a 5% level.
Conclusions
References